Ghost Kitchens: Changing the Landscape of the Restaurant Industry

Ghost Kitchens: Changing the Landscape of the Restaurant Industry The restaurant industry has been especially hard-hit by the COVID-19 pandemic. Practically overnight, restaurateurs had to shift to online ordering and curbside pickup or delivery to stay afloat. Businesses without the infrastructure to pivot quickly struggled. But for brands utilizing a ghost kitchen model, the “new normal” was simply business as usual. With their already-established online identities and distribution capabilities, ghost kitchens – commercial kitchens that prepare restaurant-quality meals exclusively for delivery or pickup – were uniquely positioned to seamlessly continue operations. According to restaurant management company Upserve, from February-April 2020, restaurants saw an 840 percent increase in weekly online ordering sales. Over the same period, restaurants in large suburbs experienced an incredible 3868 percent growth in online ordering. Part of a trend that actually started well before the pandemic, ghost kitchens (sometimes also called virtual kitchens, cloud kitchens, shared kitchens and shadow kitchens) originally catered to a generation of consumers in search of a variety of prepared cuisines quickly delivered to their doorsteps. But with Americans of all ages home-bound for the last several months, that demographic has widened significantly. Upserve reported that through mid-June, 60 percent of American consumers say they order online delivery or takeout meals at least once a week. So what’s unique about the ghost kitchen model? Ghost kitchens exist purely in a virtual world. The virtual restaurant brand(s) they are attached to have no physical brick-and-mortar building for sit-down dining. Customers view menus and place orders online. Meals are then prepared by culinary staff and dispatched quickly to doorsteps, either by in-house delivery staff or through established third-party services such as GrubHub, DoorDash, Postmates or Uber Eats. “Why are ghost kitchens becoming so popular? The simple answer is because food delivery is exploding,” writes the Roaming Hunger blog in its 2020 Guide To Ghost Kitchens. “The simple answer is because food delivery is exploding. With the growth comes PR, chefs jumping in to get ahead of the curve, and investors who want to take advantage of the trend. To explain further, ghost kitchens are a bet that the future of food lies in delivery.” Low overhead costs are one of the draws of the ghost kitchen model for investors, which is viewed by some as an affordable and less-risky option for entrepreneurs seeking entry into the restaurant industry. By eliminating dine-in seating, these businesses are able to slash their operating costs dramatically. They can be set up in out-of-the-way, less visible and less expensive rental spaces. Expenses such as furniture, décor, serveware, and printed materials are eliminated. “One estimate we heard was that a brick-and-mortar restaurant in New York City costs $1 million to $1.5 million to set up, while a cloud kitchen can get up and running for $100,000,” wrote Lena Ye and Geoffrey Jones for Harvard Business School’s Working Knowledge. There’s also no need for servers, bartenders or hosts, which reduces staffing costs significantly. Ghost kitchens employ chefs, and in some cases delivery staff, but little more is often necessary. Chefs may be trained to cook from multiple menus, meaning that a variety of restaurant brands can operate out of the same facility. And the ghost kitchen set up gives restaurants the flexibility to easily experiment with seasonal menu items. Changes can be made quickly online because physical menus don’t need to be reprinted. With COVID-19 cases currently climbing in the US, and social distancing measures continuing for the foreseeable future in most parts of the country, the ghost kitchen model enables home-bound patrons to still enjoy restaurant-quality meals safely without taking on the risks of indoor dining. And with consumers of all ages experiencing the convenience of high-quality restaurant-meal delivery, it isn’t difficult to envision these new customers sticking around on the other side of the pandemic. “We’ve used it to deliver food to friends and family who couldn’t go out for pickup,” said Sandra Dawson, a Montgomery County, MD resident who began using GrubHub during the COVID-19 pandemic. “We use it for us when we’re in a time crunch for the ease of taking off an errand on our to-do list. When life starts to return to normal, it will continue to be a service we’ll frequently rely on.”